PR-235 Denials Explained: How to Identify, Appeal, and Prevent Them

Denial codes are a common challenge for healthcare revenue cycle management (RCM) teams, with PR-235 being a frequent issue. This denial relates to sales tax assessed on medical items, often causing confusion and payment delays. Understanding how to handle PR-235 denials is crucial for maintaining financial stability and operational efficiency.

In this article, we’ll explain the PR-235 denial code, how it compares to similar codes, its common causes, the impact on RCM teams, and actionable strategies to appeal and prevent it.

What Is a PR-235 Denial?

The PR-235 denial code indicates that a claim was adjusted due to sales tax applied to medical items, which is deemed the patient’s responsibility. The prefix “PR” stands for Patient Responsibility, meaning the patient, not the payer, is financially accountable for this adjustment. This often occurs when state or local laws mandate sales tax on certain medical supplies, such as durable medical equipment or prosthetics.

PR-235 denials differ from other denial codes in that they specifically address tax-related charges rather than clinical or administrative errors. It’s essential for RCM teams to understand this nuance to ensure accurate billing and reduce unnecessary denials.

Comparison: PR-235 vs Similar Denial Codes

Denial Code	Prefix Meaning	Reason/Description	Who's Financially Responsible
PR-235	Patient Responsibility	Sales Tax	Patient
CO-97	Contractual Obligation	Service not covered by payer	Provider
OA-23	Other Adjustment	Charges exceed contracted rate	Provider

While CO-97 and OA-23 denote provider obligations, PR-235 explicitly designates the patient as responsible. This distinction is important for ensuring proper billing and follow-up processes.

Common Causes of PR-235 Denials

1. Incorrect Sales Tax Application: Misclassification of tax-exempt medical items can lead to improper application of sales tax.
2. State-Specific Tax Regulations: Lack of awareness of state and local tax laws governing medical items.
3. Patient Billing Errors: Failure to inform patients of their tax responsibility during the billing process.
4. Inadequate Documentation: Missing proof of tax-exempt status for certain medical supplies.
5. Payer Policies: Inconsistent payer policy enforcement regarding tax-related adjustments.

Impact on Revenue Cycle Teams

PR-235 denials can strain healthcare organizations financially and operationally, requiring proactive strategies to mitigate these impacts.

Financial Impact:
- Loss of revenue from unresolved or unappealed denials.
- Increased accounts receivable (A/R) days, delaying cash flow.
- Risk of write-offs if sales tax errors remain unresolved.
- Higher costs associated with denial management resources.

Operational Impact:
- Diversion of staff time from critical tasks to manage denials.
- Need for specialized knowledge of tax laws and payer requirements.
- Increased coordination between billing, coding, and clinical departments.
- Challenges in identifying and addressing patterns in PR-235 denials.

Implementing robust denial management tools like CombineHealth.ai’s Adam (AI Denial Manager) can streamline identification, tracking, and resolution of PR-235 denials, reducing revenue leakage and operational inefficiencies.

Steps To Appeal a PR-235 Denial

Step 1: Review the Denial Notice
Examine the explanation of benefits (EOB) or remittance advice (RA) to identify the denial code and reason for adjustment.

Step 2: Gather Documentation
Collect all relevant documentation, including proof of tax-exempt status (if applicable), patient billing statements, and applicable state tax regulations.

Step 3: Verify Eligibility
Confirm that the medical item complies with tax-exemption rules and that the denial aligns with payer policies.

Step 4: Prepare Appeal Letter
Draft a clear and concise appeal letter outlining the issue, supporting documentation, and a request for reevaluation of the tax adjustment.

Step 5: Submit Within Deadline
Ensure the appeal is submitted within the payer’s specified timeframe to avoid automatic rejection.

Step 6: Track and Follow Up
Monitor the status of the appeal and follow up with the payer if there are delays or additional information requests.

How To Prevent PR-235 Denials

Proactive prevention is the most effective way to minimize PR-235 denials. Here are strategies for front-end processes, billing best practices, and leveraging technology.

Front-End Prevention

• Train staff on state and local sales tax regulations to ensure accurate application.
• Verify patient responsibility for sales tax during the registration and pre-authorization process.

Billing Best Practices

• Regularly update billing software with current tax codes and exemptions.
• Conduct routine audits to ensure compliance with tax laws and payer policies.

Technology Solutions

• Use CombineHealth.ai’s automated eligibility verification to flag potential tax-related issues during claim submission.
• Employ Adam (AI Denial Manager) to detect and address tax discrepancies before claims are submitted.

CombineHealth.ai’s Rachel (AI Appeals Manager) also simplifies the appeals process for PR-235 denials. With automated tracking, real-time updates, and guided workflows, RCM teams can improve appeal success rates and reduce resolution times.

FAQs

Q1: What does PR-235 mean in medical billing?
PR-235 indicates a claim adjustment due to sales tax applied to medical items, which is the patient’s financial responsibility.

Q2: Can PR-235 denials be appealed?
Yes, PR-235 denials can be appealed if the sales tax was improperly applied or if tax-exempt documentation is available.

Q3: How long do I have to appeal?
The appeal timeframe varies by payer, but it’s critical to act promptly and submit within the stated deadline.

Q4: How can I prevent these denials?
Proactively train staff on tax regulations, implement billing audits, and use advanced denial prevention tools like CombineHealth.ai’s platform. See our complete guide on denial prevention.
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